STRUCTURAL BALANCE FOR NEW YORK
WWW.ROCKINST.ORG

This paper is one in a series
of reports prepared as part of
New York State Lieutenant
Governor Richard Ravitchs
project, undertaken at the re-
quest of Governor David Pater-
son, to develop proposals that
would lead New York State to
structural budgetary balance.
Lieutenant Governor Ravitch is-
sued his initial report in March
2010. That report outlined the
deep fiscal challenges facing the
state and recommended a series
of steps to close future budget
gaps, including strict new re-
quirements for adoption and
maintenance of balanced bud-
gets.
The lieutenant governors
March 2010 report also pro-
posed that New Yorks gover-
nor be granted broader power
to address midyear budget gaps
by implementing across-the-
board expenditure reductions,
in the absence of legislative ac-
tion to deal with fiscal emergen-
cies. This report compares New
Yorks existing rules regarding
midyear budget reductions to
those in other states, and ex-
plores issues state policymakers
may wish to address during
consideration of expanded gu-
bernatorial authority to pre-
serve budgetary balance.
Reports in this series are
available at www.rockinst.org.
The Nelson A. Rockefeller Institute of Government Independent Research on Americas State and Local Governments
411 State Street Albany, NY 12203-1003 (518) 443-5522
JUNE 17, 2010
Gubernatorial Powers to Address
Budget Gaps During the Fiscal Year
New York Governors Lack Broad Authority
Commonly Found in Other States
Robert B. Ward
Executive Summary
T
he governor of New York lacks a major budgetary power
that is taken for granted in other states: the authority to
make unilateral, across-the-board reductions when neces-
sary to maintain fiscal balance. The chief executives ability to con-
trol expenditures after adoption of the budget is weak compared
to gubernatorial powers in Massachusetts, Ohio, and Oregon,
among other states.
In New York, the governors office is often described as
among the most powerful in the nation. That is true, with respect
to the initial adoption of the state budget. As a result of constitu-
tional reforms championed by Alfred E. Smith and others, the
governor structures each years appropriation bills; can force the
Legislature to act on those proposals before considering any oth-
ers; and has a strong, line-item veto power.
Yet, once the budget is adopted, a governor of New York has
only limited powers to make mid-course corrections that will keep
the budget from being thrown out of balance by unanticipated
costs or revenue shortfalls. Under longstanding practice in New
York, the executives authority to determine midyear spending
adjustments is confined to state agency operations which repre-
sent about 26 percent of nonfederally funded spending. With such
limitation, spending reductions imposed by the governor may dis-
proportionately affect certain services while failing to adequately
address the states overall budgetary imbalance. Even that limited
authority has no clear basis in New York States Constitution or
statutes, and thus could be open to legal challenge.
Studies by the National Conference of State Legislatures, the
National Association of State Budget Officers, and the U.S. Gen-
eral Accounting Office conclude that the majority of states grant
governors broad authority and responsibility to keep their states
budgets in balance. As a result of revenue shortfalls caused by the
recent recession, such powers are assuming a larger role in states
overall strategies to maintain fiscal stability.
Structural Balance for New York Gubernatorial Powers to Address Budget Gaps During the Fiscal Year

New York State faces budgetary challenges greater than any in

recent decades. The states inability to fully address an imbalance
between revenues and expenditures in 2009 resulted in $2 billion
in liabilities being rolled over into the 2010-11 fiscal year the
functional equivalent of the state borrowing from itself. For the
foreseeable future, gaps between planned expenditures and pro-
jected revenues are extraordinarily large, and significant imbal-
ances will likely remain even after the national economy recovers
fully from the recent recession. Increasingly dependent on per-
sonal income tax, the states revenue system has become more
volatile, meaning that midyear gaps may become more frequent
even when annual budgets appear to be balanced at the time of
adoption. Albanys inability to manage such imbalances has led to
repeated fiscal crises that harm school districts and municipali-
ties ability to plan effectively, degrade services from maintenance
of parks to processing of tax refunds, and reduce public confi-
dence in government.
As part of a broader plan for achieving structural budgetary
balance in New York, Lieutenant Governor Richard Ravitch has
proposed that the governor be given greater power and responsi-
bility to limit spending when necessary to close gaps during the
fiscal year. Assembly Speaker Sheldon Silver has also proposed
additional gubernatorial authority in this area. Creation of statu-
tory or constitutional guidelines could, at a minimum, assure
preservation of authority that New York governors have exercised
without clear legal mandate. Extending such authority beyond
agency operational expenditures would enhance the states ability
to deal effectively with future budget gaps and to avoid further
shifting of current costs into the future. At the same time, expan-
sion of executive power could be accomplished with certain limi-
tations to preserve the Legislatures role in establishing the states
fiscal priorities.

Executive Budget Powers in the States

New York and other states across the country face grave fiscal
challenges. Most states that produce multiyear forecasts are pro-
jecting large, recurring imbalances between revenues and expen-
ditures, even if the nations economic recovery continues as
expected. Meanwhile, governors and legislatures are attempting
to eliminate current-year gaps without enacting harmful service
reductions, economically damaging tax increases or inappropriate
borrowing. In this difficult environment, gubernatorial powers to
address gaps that arise after budget enactment are drawing
increasing attention in a number of states.
The extent of gubernatorial authority over the budget has been
a recurring issue, in New York and other states, for more than a
century. From the nations founding through the early 1900s, the
power of the purse was held almost entirely by legislatures. States
generally did not adopt a budget in the modern sense there
was no unified plan of appropriations, little organized effort to

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 Structural Balance for New York
Rankings of
gubernatorial budget
powers often overlook
the task of managing
the budget during
the year.
Rockefeller Institute
Gubernatorial Powers to Address Budget Gaps During the Fiscal Year
weigh the value of expenditures against the cost of taxes, no
broad consideration of implications for the future. The lack of a
budget system was a relatively minor matter, however, because
states expenditures and activities were limited. Until the early
1900s, their primary fiscal responsibilities were to build and main-
tain highways, provide partial funding for public schools, and op-
erate a few prisons and institutions for the mentally impaired.
Local school districts and municipalities collected, allocated, and
spent the largest share of taxpayer dollars.
During the first decades of the twentieth century, rapid popu-
lation growth and industrialization of the economy created both
the need for more public services, and the wealth to pay for them.
In response, state governments took on major new responsibilities
expanding public education and transportation systems, caring
for the indigent and disabled, regulating businesses, providing
parks, and more. The need for systematic budgeting and en-
hanced executive leadership, to establish clear priorities and effec-
tively manage new responsibilities, became apparent.
In New York, Smith and other reformers created a budget pro-
cess giving the governor clear dominance over the initial stage of
budget enactment the sole power to initiate appropriation bills
which the Legislature must use as the basis for final budgets
and a strong, line-item veto power. Numerous other states also
adopted constitutional or statutory changes that expanded the
governors leadership role.
Since the provisions creating the Executive Budget process were
added to New Yorks Constitution in 1927, various court rulings
have clarified the extent of the governors power, in many cases en-
hancing the authority spelled out in the constitutional text. The
most recent major decision in this area, the Court of Appeals De-
cember 2004 ruling in Silver v. Pataki, held that the governor can
within some unspecified limits include significant changes to
nonbudgetary laws within appropriation bills, as long as such stat-
utory proposals relate to the items of appropriation. Today, inde-
pendent researchers generally rank New Yorks gubernatorial office
among the strongest in the nation with its strong role in the
shaping of the enacted budget among the key reasons.
Such rankings, however, emphasize powers related to adop-
tion of the budget, and generally overlook the important task of
managing the financial plan during the year. 1 For example, one
frequently cited analysis, by Thad Beyle of the University of
North Carolina, rates the budget power of each states chief execu-
tive on a scale of 1 to 5, with 5 being most powerful. The five
points relate to the sharing of power between governors and legis-
latures in constructing the budget, and the extent of each gover-
nors veto power. Two governors, those in Maryland and West
Virginia, attain ratings of 5 in Beyles most recent analysis. New
York and one other state, Nebraska, receive ratings of 4, higher
than all but 46 states. The average rating of gubernatorial budget
powers is 3.1, according to Beyle. 2
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Structural Balance for New York Gubernatorial Powers to Address Budget Gaps During the Fiscal Year

Broadly speaking, New Yorks Constitution allows two dis-

tinct paths from the governors proposal to an adopted budget. In
most years, the Legislature negotiates changes to the Executive
Budget with the governor. Such changes typically include an in-
crease in the overall level of expenditures, redirection of funding
within some programs, changes in tax and other revenue propos-
als, and modification of some proposals for program restructur-
ing. When the two branches agree on such changes, the
Legislature may insert its own changes in the governors budget
bills and rely on an agreement that the governor will not veto any
spending additions; or lawmakers may require the governor to
submit amendments to his own budget proposals, for legislative
action, as the Constitution allows. (This cooperative approach
may include some relatively minor gubernatorial vetoes of items
the Legislature has added.) Such legislative-executive agreement
is the norm, and with some variation was the process that pro-
duced final budgets for the fiscal years starting in 2007, 2008, and
2009.
The second path to a final budget occurs when the governor
and the Legislature cannot agree. The state Constitution provides
that the Legislature may strike or reduce items in the Executive
Budget. Any reductions the Legislature makes to the governors
budget take effect upon legislative approval of the Executive Bud-
get bills; the governor has no power to reject or amend any such
reductions. (The governor may propose new appropriation bills to
replace any such reduced funding, but the Legislature is under no
requirement to consider such proposals.) The Legislature may
also increase or add items of appropriation (and thus increase the
overall size of the budget) provided that such additions are
stated separately and distinctly from the original items of the bill
and refer each to a single object or purpose. 3 The governor has
the power to veto such additions; the Legislature can override any
vetoes with two-thirds approval in both the Senate and Assembly.
This letter-of-the-law approach to reaching a final budget is rela-
tively uncommon, but has occurred several times since creation of
the Executive Budget. Most recently, the Legislature completed
action on the 2006-07 budget by overriding more than $1 billion of
vetoes by Governor Pataki, and approving various tax changes
some increases and some decreases over his objection. (In a
rare development, the Pataki administration refused to recognize
some of the Legislatures 2006 overrides, pronouncing them un-
constitutional creating a stalemate over certain elements of the
budget that was never resolved.) As evidenced that year and in
2003, lawmakers have the ultimate power to shape the final plan
largely as they wish if there is strong, veto-proof consensus in the
legislative branch.
Understanding the process for adoption of New Yorks annual
budget is useful in analyzing the powers of the governor to man-
age expenditures after enactment. Having played a leading role in
the shaping and adoption of the budget, New Yorks governor

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Structural Balance for New York Gubernatorial Powers to Address Budget Gaps During the Fiscal Year

like chief executives in most states has primary responsibility

for implementing the financial plan that results from interplay of
the adopted budget bills and permanent state laws. Each year,
that role requires officials in the executive branch to make hun-
dreds of major decisions, and thousands of smaller choices in ar-
eas including timing of expenditures, shaping of policies, hiring of
personnel, and other management issues. Carrying out those re-
sponsibilities represents the executive-branch function of imple-
menting the appropriation decisions and policy-formulation
choices the Legislature has made in adopting the budget. (Appro-
priations represent upper limits on authorized expenditures for
particular purposes; actual expenditures are often less than appro-
priated amounts.) At the same time, the governors Budget Divi-
sion closely monitors the level of state revenues to ensure that
adequate resources are available throughout the year and that the
fiscal year will end in balance. Maintaining such balance often re-
quires the Budget Division to time payments carefully, and in
more limited instances to hold certain particular expenditures be-
low the levels that are approved by the Legislature and included
in the years financial plan.

Now, Another Era of Intense New Budget Challenges

The constitutional structure of New Yorks budget process
was created in response to a dramatic increase in the scope of the
states fiscal responsibilities during the early 1900s. Just as oc-
curred then, the start of the twenty-first century finds the state
once again facing broader and more difficult financial choices.
Over the past two years, as the nation has undergone a sharp
and protracted economic slowdown, states have experienced his-
toric fiscal challenges as tax revenues weakened and expenditures
in many areas continued to outpace inflation. In New York, the
enacted budgets for fiscal 2009 and 2010 both included overall
spending increases more than twice the rate of inflation, due to a
combination of policy choices and rising costs.
Having accumulated over several years, New Yorks fiscal dif-
ficulties reached critical stages during the fall of 2009 after dra-
matic revenue declines starting in spring 2009 were not addressed
adequately in that years budget process. Both the governors
Budget Division and the Office of the State Comptroller (headed
by a separately elected statewide official) warned that the state
was in danger of running out of cash if revenue projections
proved accurate and if expenditures were carried out as envi-
sioned in the enacted 2009-10 budget. In early October, Governor
Paterson ordered executive-branch agencies to reduce expendi-
tures for the remainder of the fiscal year by $500 million. Later in
October, he asked the Legislature to approve midyear reductions,
including $1.3 billion in funding for school districts and local gov-
ernments.
Several weeks after the governors request, the Senate and As-
sembly approved a smaller level of reductions, including $550

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Structural Balance for New York Gubernatorial Powers to Address Budget Gaps During the Fiscal Year

Spending Outpacing Revenues: Sharply Growing Gaps for New York State
2010-11 Through 2013-14

Average
2010-11 2011-12 2012-13 2013-14 Total Growth Annual Growth

Projected gap, General Fund $7.4 billion $14.3 billion $18.3 billion $20.7 billion

Change in GF receipts 1.9% 4.4% 0.6% 4.8% 12.2% 2.9%

Change in GF disbursements 0.7% 16.1% 7.3% 6.5% 33.6% 7.7%

Data on budget gap from Revised Current Services Estimate, Before Actions, 2010-11 Executive Budget, New York State Division of the
Budget, January 2010.
Data on change in General Fund receipts and disbursements from Report on the State Fiscal Year 2010-11 Executive Budget, Office of the
State Comptroller, February 2010.

million in local assistance. After accounting for such changes, the

Budget Division warned of continuing danger that the state
would run out of cash and be unable to make scheduled pay-
ments to school districts, local governments, vendors, and other
recipients of state funding. Such an outcome was averted when
Governor Paterson ordered the Budget Division to temporarily
withhold a small percentage of scheduled payments to school dis-
tricts. In response, advocates for education funding the New
York State School Boards Association, New York State United
Teachers, and others filed suit challenging the governors
power to order such temporary withholding of appropriated ex-
penditures.4
In December 2009, for the first time since the states General
Fund was reconstituted to its current structure in 1981, the Gen-
eral Fund ended the month with a negative balance. Cash flow
forecasts included in Governor Patersons FY 2010-11 Financial
Plan, which includes all the executives proposed spending and
revenue actions, project that the General Fund will end the
months of May through August with negative balances. The state
ended fiscal 2009-10 in balance only by effectively rolling $2 bil-
lion of liabilities into the 2010-11 fiscal year. 5 In April 2010, the
governor, the Budget Division, and the State Comptroller warned
once again that the state was approaching a cash crisis. Governor
Paterson prepared to delay state payments to school districts to
deal with the shortage, and education groups filed a second law-
suit. At this writing, both lawsuits are pending.
Tax revenues in New York and other states can be expected to
resume growth in coming years as the nations economic recovery
continues. However, most observers agree that serious budgetary
challenges are almost certain to remain even after the economy
and state revenues regain strength. In New York, both the Budget
Division and the Office of the State Comptroller project large an-
nual budget gaps into the foreseeable future. Nationally, the Gov-
ernment Accountability Office predicts that absent policy
changes the scope of overall gaps between state and local gov-
ernments revenues and expenditures will double during the com-
ing decade, and double again over the following decade. 6

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Structural Balance for New York Gubernatorial Powers to Address Budget Gaps During the Fiscal Year

The likelihood of significant, ongoing fiscal pressure implies

that, for years to come, enactment of balanced annual budgets will
require New York State to restrain or cut spending on major ser-
vices, and to increase taxes and/or other revenues. The combina-
tion of political pressure to avoid such choices, and unpredictable
revenue, often results in financial plans that do not remain in bal-
ance without midyear corrective action by the governor, the Leg-
islature, or both.78910

How Do Other States Address Midyear Budget Gaps?

In developing annual budgets, state policymakers must make
many assumptions and estimates about factors that will affect rev-
enues and spending. Tax revenues are strongly influenced by eco-
nomic factors such as personal income and retail sales; projections
of such trends by even the most highly respected economists are
typically imperfect. Demand for expenditures can vary based on
uncertain factors, including the number of students enrolled in
public schools, and the number of low-income individuals who
qualify for Medicaid and other assistance. As a result, state bud-
gets historically are more likely to develop gaps or surpluses, than
to end the fiscal year in precise balance.
As part of the twentieth-century movement to adoption of for-
mal budgeting and gubernatorial fiscal management, most states
enacted laws giving the governor or other executive branch offi-
cials certain powers to adjust spending amounts from those ap-
propriated by the Legislature. Often, such provisions are
considered essential elements of constitutional or statutory
schemes to promote budgetary balance, some form of which is re-
quired in 49 states.
Most states allow or direct the governor (or a designee such as
the budget director) to reduce budgeted expenditures under con-
ditions such as development of an actual or potential deficit. Spe-
cifics vary from state to state. In many states, the legal foundation
for such powers is not fully clear, and governors use of impound-
ment authority is based partly on tacit approval from legislatures.
Often, such powers are poorly understood because they are based
on longstanding practice rather than law; or because constitu-
tional or statutory provisions on which they are based are written
only in general terms. Generally, reflecting concern for separation
of powers, such executive authority does not include the ability to
make unilateral reductions in legislative or judicial budgets. To
avoid damage to a states creditworthiness, payments of principal
and interest on debt also are often excluded. Some states in-
cluding Massachusetts, Ohio, and Oregon expressly allow gov-
ernors to reduce aid to municipalities and public schools.
Two organizations representing state officials across the coun-
try the National Conference of State Legislatures (NCSL), and
the National Association of State Budget Officers (NASBO)
have undertaken independent analyses of gubernatorial powers
to reduce enacted budgets in all the states. The organizations use

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Structural Balance for New York Gubernatorial Powers to Address Budget Gaps During the Fiscal Year

More Volatile Revenues = Increased Risk of Midyear Budget Gaps

Beyond the increasing difficulty in matching recurring revenues to recurring expenditures, the
changing natures of New Yorks tax structure and sources of taxpayers personal income present fur-
ther obstacles to maintenance of budget balance. As in many other states, revenue systems have be -
come more volatile in recent years, making it harder to ensure that revenue estimates included in the
annual financial plan prove reliable as the fiscal year proceeds.
Greater reliance on the income tax and increases in the more volatile sources of income such as
capital gains, have made state revenues more responsive to the business cycle since 1998, according
to Richard Mattoon and Leslie McGranahan, economists at the Federal Reserve Bank of Chicago. 7
In recent decades, many states have devoted increased resources to technical analysis of their
revenue streams, seeking to enhance their ability to forecast revenues accurately. Yet despite such ef-
forts, average errors in states revenue forecasts have grown larger during the last two national reces-
sions, compared to those in past recessions. 8 In New York, the average absolute error in revenue
forecasts for adopted budgets (without netting the effects of positive and negative errors) was 2.4
percent in fiscal 1996 through 2000, and rose to 4.2 percent in fiscal 2002 through 2007, according to
the Budget Division.9 Most of the increase was due to increased difficulty in forecasting revenue
from the personal income tax.
Over the nine years from fiscal 2001 through fiscal 2009, New Yorks adopted budgets included
five years with revenue projections that were too low and four with projections that were too high.
In total, the overestimates and underestimates were very nearly equivalent at slightly more than $9
billion. If New Yorks budget system included automatic stabilizers to balance such ups and downs,
forecast errors would cause little damage. But the state tends to spend unexpected revenues, thus
raising the level of structural expenditures in areas such as school aid and health care. When inevita-
ble downturns arrive, policymakers find it very difficult to respond to unexpected gaps. The nearby
graph shows multibillion-dollar revenue shortfalls in fiscal 2002, 2003, 2008, and 2009. None of the
budgets adopted in the wake of those shortfalls were balanced on a structural basis.
Compared to other states, New York is especially susceptible to revenue volatility and thus
heightened risk of unexpected budget gaps. In fiscal 2009, income taxes made up 57 percent of the
states tax revenue, compared to a national average of 34 percent, according to Census Bureau data.
Taxes on capital gains, bonus income, and other activities generated by the financial sector have rep-
resented 20 percent of the states g
overall tax revenue base, accord- Enacted Budget Forecast Accuracy: Forecast Errors
($ Billions)
ing to the Budget Division. In- 4
come sources that are most
closely tied to the fate of the fi- 3

nancial sector, capital gains and 2

bonus payments, always exhibit a
high degree of volatility and are 1
difficult to forecast with preci-
0
sion, the Budget Division 1995-96 1997-98 1999-00 2001-02 2003-04 2005-06 2007-08
states.10 Recent increases in tax -1
rates for upper-income earners
exacerbate such difficulty, accord- -2
ing to the Division. -3

-4
Personal income tax User taxes and fees Business Taxes Other Taxes
Note: Error is defined as the difference between actual and forecast.
Source: NY State Department of Taxation and Finance; DOB staff estimates.

Source: New York State Division of the Budget

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Structural Balance for New York Gubernatorial Powers to Address Budget Gaps During the Fiscal Year

different methodologies to assess impoundment powers, so their

conclusions are not directly comparable. Despite their represent-
ing opposite sides of the executive-legislative balance of power,
both find that unilateral authority to reduce expenditures during
the fiscal year is a common element of governors budgetary pow-
ers.
Very few states mandate that the governor must consult with
the legislature to reduce the enacted budget, NCSL staff com-
mented in a 2008 paper. Illinois, Missouri, and Ohio are among
states that grant governors unlimited authority to reduce the
budget when fiscal conditions require, according to NCSL.
According to NASBO, 38 governors have some authority to
cut an adopted budget without legislative approval. Of those, 32
states (including New York) impose some restrictions.
The U.S. General Accounting Office (now the Government Ac-
countability Office) reviewed state laws and practices in this area
for a 1993 report on states balanced-budget requirements. It con-
cluded, among other things: Governors have broad powers to cut
budgets during the year.11
In a recent decision on the unallotment power granted to
Minnesotas governor, the states Supreme Court reviewed a
number of court decisions relating to analogous powers in other
states. It found: Most courts conclude that the executive branch
has some inherent authority and discretion over spending, partic-
ularly to spend less than appropriated, but only within the scope
of legislatively enacted spending priorities. 12
The major elements missing from gubernatorial impoundment
authority in New York are aid to school districts, general assis-
tance for municipalities and Medicaid, which together make up
close to half of state-funded spending. States where the governor
may implement midyear reductions in those areas include Mary-
land, Massachusetts, Minnesota, Ohio and Oregon. In those and
many other states, governors powers to implement midyear
spending reductions are well defined in law. Discussion of several
examples follows.

Connecticut
In Connecticut, General Statute 4-85 provides authority for
the governor to reduce total General Fund appropriations by up
to 3 percent on her own authority. Additional rescissions within
individual appropriations, up to 5 percent, may be made with ap-
proval of the Finance Advisory Committee. Its nine members in-
clude the governor and lieutenant governor; the comptroller and
treasurer, both of whom are elected independently of the gover-
nor; and five members of the General Assembly.
As the states attorney general summarized the law in an Oc-
tober 2009 opinion:
the Governor is authorized to reduce allotments if the
Comptroller projects a General Fund deficit greater than
one percent of total General Fund appropriations or the

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Structural Balance for New York Gubernatorial Powers to Address Budget Gaps During the Fiscal Year

governor determines that estimated budget resources dur-

ing the fiscal year will be insufficient to finance all appro-
priations in full.13
Most municipal aid, including general state assistance for
schools, is exempt from such reductions. In addition, as a practi-
cal matter, a Governor is constrained from cutting appropriations
for entitlement programs or pension and health benefits for state
employees and retirees expenditures that comprise much of the
budget, according to Governor Jodi Rells office.14
In November 2009, Governor Rell announced $34 million in
rescissions as a first step toward dealing with a projected deficit of
nearly $400 million.

Maryland
Maryland law provides that the governor may reduce any ap-
propriation by up to 25 percent, with approval of the state Board
of Public Works.15 The board has a wide range of powers over
state borrowing, expenditures, and procurement. It is composed
of the governor, the comptroller (who is elected separately by the
voters), and the state treasurer (who is elected for a four-year term
In fiscal 2009, by the states General Assembly). Thus, the governor must obtain
Massachusetts agreement from either another statewide constitutional officer or
from the representative of the legislative branch. Areas that are
Governor Deval
exempt from such reductions include appropriations for the legis-
Patrick reduced lature and judiciary, principal or interest on state debt, and man-
budgeted allotments dated aid to public schools.
by $887 million, In fiscal 2010, the governor proposed and the board approved
including $120 three series of reductions totaling a record-high $957 million,
some 4.3 percent of the nonfederally funded expenditures in the
million in aid to cities states enacted budget. In fiscal 2009, midyear reductions totaled
and towns. $506 million.16

Massachusetts
Massachusetts State Finance Law authorizes the governor to
reduce allotments to state agencies whenever available revenues
will be insufficient to meet all of the expenditures authorized to
be made from any fund. The governor must notify legislative fis-
cal committees 15 days before any reductions, and submit in
writing a report stating the reason for and effect of such reduc-
tions, or submit to the general court specific proposals to raise ad-
ditional revenues by a total amount equal to such deficiency. 17
The governors reductions may include aid to cities and
towns, which fund public schools. In October 2009, Governor
Deval Patrick imposed $229 million in midyear reductions,
roughly 1.2 percent of nonfederally funded expenditures projects
for the year. Those reductions did not include general aid to mu-
nicipalities. During the previous fiscal year, Governor Patrick re-
duced budgeted allotments by $887 million, including more than
$120 million to cities and towns.

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Structural Balance for New York Gubernatorial Powers to Address Budget Gaps During the Fiscal Year

Minnesota
In Minnesota, expenditure reductions adopted administratively
in response to revenue shortfalls are known as unallotments.
While the law authorizing such cuts was enacted in 1939, gover-
nors have used the tool sparingly. For example, during the three
decades up to 2008, only three such actions were taken: reductions
of $195 million in 1980, $110 million in 1986, and $281 million in
2003.18
Executive-branch officials must notify the Legislative Advi-
sory Commission, which is made up of six high-ranking legisla-
tors, at least 15 days before unallotments occur. The legislative
commission has no power to stop the unallotment. The state law
governing budget actions also includes provisions requiring that
unexpected revenues be deposited into cash-flow and reserve ac-
counts, providing some cushion to help avert unallotments during
future fiscal crises.19
Its been common practice to wait for the Legislature to act
before unalloting, said Mark Shepard, legislative analyst in the
nonpartisan House Research Department. Thats the way the ex-
ecutive branch acknowledges that this is an extraordinary
power.
Minnesotas gubernatorial budget-cutting authority has been
challenged in court on state constitutional grounds, and upheld
on at least three occasions. In May 2010, the states highest court,
the Supreme Court, overturned Governor Tim Pawlentys use of
the power for certain appropriations in 2009. The court clearly re-
affirmed the existence of such authority. But it found that the gov-
ernor used the unallotment process inappropriately to achieve
budgetary balance before the fiscal year had begun, rather than to
deal with an unexpected shortfall during the year. 20 In the after-
math of that ruling, lawmakers began to consider proposals that
would cap unallotments at 2 percent of general fund appropria-
tions, and 10 percent within a particular appropriation. 21

Ohio
Ohio state law requires the budget director to report each
month on the status of receipts and expenditures, and not only
permits but requires the governor to order spending reductions
sufficient to prevent a deficit, under certain conditions. 22 Section
126.05 of the states Revised Code provides: If the governor as-
certains that the available revenue receipts and balances for the
general revenue fund for the current fiscal year will in all proba-
bility be less than the appropriations for the year, the governor
shall issue such orders to the state agencies as will prevent their
expenditures and incurred obligations from exceeding such reve-
nue receipts and balances. In January 2008, Governor Ted Strick-
land imposed $733 million in midyear reductions, including some
cuts to K-12 education.23

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Structural Balance for New York Gubernatorial Powers to Address Budget Gaps During the Fiscal Year

Oregon
Oregon law, amended just last year, gives the state Depart-
ment of Administrative Services the power to reduce allotments to
agencies with approval of the governor. Statute 291.261 requires
the department and the governor to follow legislative funding
priorities as expressed in statutes and in the legislatively adopted
or approved budget for the biennium. Unless statutes or the bi-
ennial budget indicate otherwise, the department and the Gover-
nor shall assume that all General Fund appropriations have the
same priority and shall reduce allotments of General Fund mon-
eys for each state agency receiving General Fund moneys by the
same percentage.
Governor Ted Kulongoski announced on May 25, 2010, that he
planned to impose across-the-board agency reductions of up to 9
percent including more than $200 million in school aid after
the states chief economist reported revenue projections had fallen
by some $560 million.24

Other States
As more governors respond to fiscal crises by exercising their
authority to reduce appropriations, the lack of clear legal defini-
tions in some states is producing uncertainty over the status of
such steps. For example, New Jersey Governor Chris Christie has
used the impoundment power aggressively. Soon after taking of-
fice in January 2010, Governor Christie signed an executive order
directing the states budget office to identify and place into re-
serve items of appropriation ... in an amount sufficient to ensure
that the State budget is in balance. In support of such executive
action, he cited the state Constitutions requirement that the state
maintain a balanced budget, and several statutes with relevant
provisions one of which, for example, authorizes the governor
to freeze expenditures deemed to represent extravagance, waste,
or mismanagement. Some legislators and others have raised
questions about the extent of the governors legal authority to act
unilaterally. The governors order is expected to be appealed to
state courts, according to a February 10, 2010, news report. 25
Executive impoundment power can be an effective tool in main-
taining fiscal balance, but does not appear to shift policymaking in-
fluence from legislatures to governors, according to a study by
James W. Douglas of the University of South Carolina and Kim U.
Hoffman of the University of Central Arkansas.
Gubernatorial impoundment authority is generally used to
maintain balanced budgets during times of revenue shortfall, the
authors wrote in a 2004 paper. To a lesser extent, impoundments
are used to promote fiscal responsibility. We also find that im-
poundments do not serve as an effective policy tool for governors
in most states (e.g., they do not increase the governors ability to
promote their political agendas) because of political and structural
restrictions placed on rescission authority and the weakness of
impoundments relative to other gubernatorial powers. 26

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Structural Balance for New York Gubernatorial Powers to Address Budget Gaps During the Fiscal Year

Gubernatorial Power to Manage the Budget in New York

New Yorks Constitution gives the governor clear leadership
in formation of the annual budget, and clear responsibility for im-
plementation and management of the financial plan. The chief ex-
ecutives power to respond to fiscal emergencies once a budget is
adopted, however, is limited and poorly understood because it
is not clearly outlined in law.
Section 1 of Article IV of New Yorks Constitution provides
that the executive power shall be vested in the governor. Sec-
tion 3 of the same article provides, in part, that the governor
shall expedite all such measures as may be resolved upon by the
legislature, and shall take care that the laws are faithfully exe-
cuted. As Galie observes, these elements of the states fundamen-
tal law provide the governor with power to supervise and
control the executive branch.27 Section 4 of Article V empowers
the governor to appoint and remove the top officers of all depart-
ments, with specified exceptions including the departments of ed-
ucation, law, and audit and control. Such powers, too, convey
broad management authority over operations of the executive
branch. Taken together, these constitutional provisions are some-
times cited as implying or necessitating some gubernatorial power
to control agency spending without legislative approval.
Still, under the State Constitution, the executive possesses no
express or inherent power based upon its view of sound fiscal
policy to impound funds which have been appropriated by the
Legislature, the Court of Appeals found in a 1980 case, Oneida v.
Berle.28
In Minnesota and some other states, gubernatorial authority to
enact midyear budget cuts flows, in part, from constitutional re-
quirements that the budget remain in balance through the year.
Unlike many other states, New Yorks Constitution does not re-
quire adoption of a balanced budget or maintenance of fiscal bal-
ance through the year and thus does not charge the governor
or the Legislature with fulfilling such a responsibility. Article VII,
the source of the governors extensive authority over initiation
and enactment of the annual budget, is silent as to implementa-
tion of the financial plan.
The states statutes do outline additional powers not con-
tained in the Constitution. The State Finance Law contains various
sections providing executive authority. Of particular importance
for discussion of midyear budget adjustments, Section 42 of the
State Finance Law provides: The several amounts appropriated
in any act shall be deemed to be only for so much thereof as shall
be sufficient to accomplish in full the purposes designated by the
appropriations
While New Yorks Constitution does not provide specific au-
thority for the governor to refuse to spend funds appropriated by
the Legislature, governors did so consistently through much of
the twentieth century. The decades from Smiths introduction of
the Executive Budget process to Hugh L. Careys leadership in

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Structural Balance for New York
In the decades before
the early 1980s, broad
budget impoundment
by New Yorks
governors was a
common practice.
Rockefeller Institute
Gubernatorial Powers to Address Budget Gaps During the Fiscal Year
response to the mid-1970s fiscal crises for New York City and the
state saw strong chief executives using a range of constitutional,
statutory, and political powers to exercise broad control over fis-
cal and other policies. As Joseph Zimmerman has noted, Until
1980 it was assumed that once the legislature approved appropri-
ation bills, the governor was in charge of budget execution and
was under no requirement to spend all the funds that were appro-
priated. In other words, the governor could order a freeze on
spending for a specific purpose, including a freeze on the hiring of
personnel.29
The Legislature itself did not question that assumption. In a
1985 law review article, the counsel to the New York State Senate
Minority (then the Democratic members of the Senate), Eric Lane,
wrote that executive impoundments represented an excessive ag-
gregation of executive power and were not valid under the state
Constitution. Nevertheless, the article observed that impoundments
had been a common practice over time. Lane wrote that im-
poundments the Cuomo administration implemented in 1983-84:
reflected an executive practice at least informally con-
doned until this time by legislative acquiescence. As cor-
rectly stated by a spokesman for the Division of the Budget,
[the 1983-84 impoundments are] part of what the state has
done and part of what the Legislature has watched happen
for years. We didnt pick on these agencies. We did what
we always do. What was unusual was the legislative re-
sponse to a previously common executive practice.30
By the early 1980s, the Legislature had begun to push back
against executive impoundment by writing language into annual
budget bills that required specific levels of staffing and otherwise
attempted to reduce executive-branch discretion. Such steps did
not question the governors constitutional authority to impound
appropriated funds in the absence of such language. Local offi-
cials in Oneida County and elsewhere took that issue to the
courts, however. The resulting Court of Appeals decision in
Oneida v. Berle remains the most important case law relating to ex-
ecutive impoundment in New York.
The case emerged from the Carey Administrations refusal to
spend $7 million the Legislature appropriated in 1976 to aid mu-
nicipalities in operating and maintaining sewage treatment plants.
Speaking of the impoundment decision, the budget director stated
that action in this matter is one instance of a necessarily compre-
hensive effort to tighten State spending. As the Court of Appeals
summarized the argument of the executive branch:
The director urges that the Governor, as the Chief Executive
Officer of the State, has an obligation to maintain a balanced
budget throughout the fiscal year and, to accomplish that
goal, possesses implied constitutional power to reduce duly
enacted appropriations. Alternatively, respondents main-
tain that the appropriation statute invested the director with
discretionary authority to withhold funds designated for
the sewage treatment aid program.31
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Structural Balance for New York Gubernatorial Powers to Address Budget Gaps During the Fiscal Year

The states highest court ruled against the executive branch,

saying the executive branch may not override enactments
which have emerged from the lawmaking process. It is required
to implement policy declarations of the Legislature, unless vetoed
or judicially invalidated.
While the text of the Oneida v. Berle ruling provides no excep-
tions to that requirement, three decades later a tacit understand-
ing remains that the Legislature will allow governors to make
some unilateral budget reductions, as long as such actions are lim-
ited to the area of state agency operations.
That limitation renders a large majority of the budget un-
touchable. In fiscal 2010-11, under the proposed Executive Budget,
state operations expenditures would total $20.4 billion, just over
25 percent of all expenditures aside from federal and capital
funds.32 In other words, any gubernatorial actions to address mid-
year gaps must ignore three-quarters of state expenditures. Major
programs thus excluded include state aid to school districts and
municipalities, Medicaid, funding for community colleges and
City University of New York senior colleges, and the STAR prop-
erty-tax relief program.
In both 2008 and 2009, Governor Paterson ordered state agen-
cies to implement substantial current-year spending cuts. An Au-
gust 2008 memorandum from then-Budget Director Laura L.
Anglin to state department heads provides a detailed look at re-
cent use of the impoundment power. Governor Paterson had or-
dered state operations spending reductions of 7 percent, or $630
million. Among other instructions for carrying out the governors
directive, the memo provided:
As with our earlier efforts, agencies 7% savings strategies
should focus on delivering core programs more efficiently
and eliminating non-core functions and non-essential
spending.
In general, your approach to achieving the required savings
must balance the following main objectives Preserving
significant policy/program goals to the extent possible,
while still identifying opportunities for efficiencies
All agency programs and operations should be critically re-
viewed to identify opportunities to eliminate less essential
activities and spending on non-essential items, increase effi-
ciency and improve outcomes. You should identify funda-
mental cost-saving changes to provide recurring savings.
it is expected that agencies will propose increased attri-
tion savings and reduced staffing levels. Current and
planned staffing patterns should be evaluated to determine
the optimal allocation of numbers and types of staff to spe-
cific functions. Lower-priority activities should be consid-
ered for elimination or reduced staffing.
Significant NPS [nonpersonal service] economies must be
achieved to help generate the State Operations savings re-
quired at this time. Spending must be limited to essential
needs and all non-essential NPS must be eliminated. All
NPS obligations must be approved by the agency head,

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Structural Balance for New York
New York governors
have no clear
statutory authority
even for the limited
impoundment actions
implemented in
recent years.
Rockefeller Institute
Gubernatorial Powers to Address Budget Gaps During the Fiscal Year
either as specific transactions or pursuant to a plan ap-
proved by the agency head. Spending for technology acqui-
sitions, office equipment and supplies, conferences,
publications, travel (particularly out of state travel), and
contractual services must be subjected to particular scru-
tiny, and should not be approved unless it is critical to sus-
taining the agencys core mission activities.33
Directions in the August 2008 memo were implemented by
state agencies (perhaps to varying degrees) with little or no objec-
tion from the Senate, Assembly, or outside organizations that
were affected by spending reductions. The impoundments appear
to go well beyond the authority provided by Section 42 of the
State Finance Law, which states that appropriations should be fol-
lowed by actual expenditures only to the extent that is sufficient
to accomplish in full the purposes designated by the appropria-
tions. The Budget Division asked agencies not to determine a
level of expenditures necessary to carry out certain purposes, but
instead to meet certain targets for spending reductions. Nor were
reductions required to follow policy priorities expressed in appro-
priations by the Legislature; rather, agency leaders were in-
structed to determine core and non-core programs, along
with less essential and lower-priority activities, and make sig-
nificant funding decisions accordingly. If performed well, such as-
sessments represent model leadership in public administration. It
is unclear, however, whether they are supportable by existing
statutory and case law in New York.
Conventional wisdom in Albany often suggests that such gu-
bernatorial authority is settled law. For example, a November
2009 New York Times article reported, The Paterson administra-
tion has already squeezed the budgets of state agencies, an action
it can take unilaterally.34
A handbook for state agency administrators that was published
eight years after the Oneida v. Berle decision explained this point in
more careful terms. The handbook, Governing the Empire State: An
Insiders Guide, cited the provision in Section 42 of the State Finance
Law regarding appropriations serving as an upper limit on spend-
ing, with the executive branch being expected to expend only
so much thereof as shall be sufficient to accomplish in full the pur-
poses designated by the appropriations. The authors of the hand-
book commented: Of course, the question of what is needed to live
up to legislative intent can be a controversial one.35
The handbook, produced by employees of the executive
branch, went on to describe the practice that has developed in the
wake of Oneida v. Berle and the resulting inability of the governor
or Budget Division to make certain midyear cuts without legisla-
tive approval:
Since over sixty percent of the state budget is used for assis-
tance to local governments, when legislative, judicial, capi-
tal and debt-service appropriations are taken into account,
DOBs flexibility is substantially restricted. Cuts necessary
to maintain a balanced budget fall upon the operations
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Structural Balance for New York Gubernatorial Powers to Address Budget Gaps During the Fiscal Year

(State Purposes) budget, magnifying the impact on state

agencies.36
While Oneida v. Berle did not end the practice of governors
making unilateral reductions in expenditures, it apparently led to
more caution in the use of such power. Governing the Empire State
also includes this observation:
One DOB examiner stated that, in recent years, the practice
of allocating an amount less than appropriated has become
less common. The Legislature and DOB have to work to-
gether each year in the budget process. If Budget were rou-
tinely to allocate less than the amount appropriated, this
would create unnecessary tensions between it and the Leg-
islature, making everyones job more difficult.37
Assembly Speaker Sheldon Silver has said the governor can
unilaterally reduce expenditures by using layoffs or other mea-
sures to reduce the number of state employees: He can manage
the state work force in any way that he chooses. He doesnt need
the Legislature to do that. 38 While having acquiesced to gover-
nors reductions of nonpersonnel agency expenditures includ-
ing the impoundments of the past two years outlined above the
Legislature has not formally indicated a position on whether such
impoundment is constitutionally permissible.

Should New Yorks Governor Have Clearer

Authority to Address Midyear Gaps?
If inability to restrain the growth of spending is one cause of
New Yorks chronic budget problems, and if midyear gaps are
likely to occur with increasing frequency in the future, strengthen-
ing the governors ability to deal with imbalances that arise after
enactment of the annual budget may be one useful reform.
Such was the thinking behind one of the key recommenda-
tions proposed by Lieutenant Governor Ravitch in March 2010, as
part of a broader plan to produce long-term, structural budget
balance. The lieutenant governor proposed creation of an inde-
pendent Financial Review Board to assess whether the states fi-
nancial plan is in balance or is making adequate progress toward
structural balance. If the board were to find that the financial plan
is not projected to achieve or maintain such balance, the governor
and the Legislature would have 15 days to agree on remedial ac-
tion. If such agreement were not forthcoming, the governor would
have new power to reduce current-year appropriations pro rata
on a permanent basis, only to the extent necessary to achieve or
maintain Balance. No reductions in appropriations for debt ser-
vice, binding contractual obligations, or for the legislative or judi-
cial branches would be permitted.39
How would such a new power for New Yorks governors
work in practice?4041
The Ravitch proposal relates to current-year appropria-
tions. With the Minnesota controversy as informative context,
such an approach would not change the existing gubernatorial

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Structural Balance for New York Gubernatorial Powers to Address Budget Gaps During the Fiscal Year

A Broad Grant of Authority to the Budget Division?

In the years after World War II, when the state was in the midst of a large capital construction
program, the Budget Division began to use Certificates of Approval to authorize allocations from
funds appropriated for specified purposes. The certificate process permitted the Budget Director to
control the rate of expenditure ... and facilitated the release of funds for individual projects on the ba-
sis of priority and urgency.40 In 1995, the Executive Budget appropriation bills submitted by Gover-
nor Patakis Budget Division added language formally extending the divisions certification
authority to all appropriations, no longer limiting the requirement to capital expenditures.
That language made clear that payment of all appropriations are conditioned upon issuance of
Certificates of Approval, and has been enacted by the Legislature in each appropriation bill thereaf-
ter, including all those set forth in the enacted budget for FY 2009-10, Budget Director Robert
Megna wrote in an affidavit filed in a 2010 lawsuit challenging delays in state payments to school
districts. Specifically, all appropriation bills now contain the following language: No moneys ap-
propriated by this chapter shall be available for payment until a certificate of approval has been is-
sued by the director of the budget.
That broad grant of authority to the budget director is the law of the state (relative to each year s
appropriations, at least), as enacted by the Legislature. One way to interpret such language would be
to conclude that, if the budget director chooses not to issue a certificate of approval at all, the statu-
tory language not only allows but requires appropriated moneys to be withheld permanently. An al-
ternative argument could hold that, under Oneida v. Berle, such impoundment power is
unconstitutional in the absence of more clear and detailed legislative delegation of power.
In filing a legal challenge when Governor Paterson delayed certain payments to school districts
in 2010, the New York State United Teachers union and New York State School Boards Association
argued: The Executive Branch, which includes the Governor and the Division of the Budget, has no
inherent, express, or discretionary power to permanently or temporarily impound funds that have
been appropriated by the Legislature, or to otherwise delay the payment of such funding beyond the
payment dates set by the Legislature. 41
Thirty years after the Oneida v. Berle ruling, and 83 years after creation of the Executive Budget
process, that point remains unsettled.

powers in adoption of the annual budget. (Another element of

the Ravitch plan would place new guidelines on governors
ability to propose statutory revisions within the Executive Bud-
get.)
A number of states whose constitutions or statutes clearly al-
low for gubernatorial impoundment place specific limits on such
authority. There are good arguments for such limitations. Gover-
nors can always call lawmakers into session to vote on large
changes to enacted budgets. As described earlier in this paper,
New Yorks Legislature enacted significant reductions to the
2009-10 financial plan at the request of Governor Paterson in late
2009. (Yet that same action illustrated that, at least sometimes, leg-
islators find it difficult or impossible to take all the steps necessary
to achieve budgetary balance. With no further action by the Sen-
ate and Assembly before the end of the fiscal year, the state began
the 2010-11 year with $2 billion in liabilities that had simply been
shifted from one fiscal year to the next in effect, borrowing that
amount from itself.)

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Structural Balance for New York Gubernatorial Powers to Address Budget Gaps During the Fiscal Year

Many states that allow governors to enact midyear reductions

require such cuts to be the same percentage in a wide range of ap-
propriations, or impose limitations on the amount to be taken
from any individual area. Such provisions prevent an executive
from favoring certain programs at the expense of the legislatures
priorities. The Ravitch proposal echoes such requirements by call-
ing for reductions to be made pro rata, or by roughly equivalent
proportions across agencies and programs.
The overall framework for executive and legislative authority
over the budget is enshrined in the state Constitution. Amend-
ment of the Constitution would be the strongest approach to clari-
fying the governors responsibility and ability to maintain
budgetary balance in case of midyear fiscal emergencies.
Pending any amendment, such provisions could at first be
written into statute. Statutory authority alone, in the absence of
constitutional change, might result in a court challenge to any
governors use of such power. The existing constitutional grants
of budgetary and general executive authority to the governor
would provide some defense against any such challenge. In
Oneida v. Berle, the Court of Appeals left open the possibility that a
limited legislative delegation of power could pass constitutional
muster. The Carey administration had argued that the 1976 Legis-
lature conferred such power on the executive branch with lan-
guage in an appropriation bill that required certain approval by
the governors budget director before disbursements were made.
The unanimous Court of Appeals rejected that argument, saying:
the appropriation did not confer unfettered discretion upon
the director to withhold all or any portion of the appropriation. It
added: Such a legislative delegation would be drastic indeed,
and may not be inferred from ambiguous language. This is espe-
cially so in instances where the Legislature has provided no
guidelines for the exercise of discretion. In other words, if the
Legislature were to make a clear grant of budget-balancing au-
thority to the governor, and provide guidelines for use of such
power, the Oneida v. Berle precedent might be cited as evidence
that such a delegation would be constitutionally permissible.
A new provision authorizing the governor to make midyear
spending reductions, within limits, would also fit well within the
overall concept of budget-making powers that Governor Smith
and other reformers first envisioned nearly a century ago. Smiths
plan still the essential framework in New York has elements
of a bias in favor of achieving budgetary balance by limiting ex-
penditures rather than encouraging higher taxes. The governor
initiates the appropriation bills that the Legislature must use in
adopting the budget. The Legislature may strike or reduce items
of appropriation from such bills, and the governor has no author-
ity to veto such changes. The Legislature may add items of appro-
priation, or increase the level of items the governor included in
the Executive Budget. In such cases, the governor may veto new
items or increases. The Legislature may override such vetoes, but

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Structural Balance for New York Gubernatorial Powers to Address Budget Gaps During the Fiscal Year

only with a super-majority of two-thirds in both the Senate and

Assembly. Thus, either of the two branches may check the others
desire to increase spending, but the executive and Legislature
must act together to approve such increases or to change the tax
law.

Conclusion
Absent major policy changes, New Yorks budgetary environ-
ment is likely to be characterized for some years to come by sig-
nificant imbalances between trendline growth in revenues and
expenditures. The political environment in the state often makes it
difficult for policymakers to achieve real budgetary balance in the
environment of annual budget adoption. And increased volatility
in the states revenue system makes fiscal crises more likely than
has been the case in the past.
Over the last decade, state policymakers have increasingly re-
sorted to fiscal manipulations to balance the states revenues and
operating expenditures, according to the Office of the State Comp-
troller. Such manipulations include sweeps of non-General Fund
accounts to produce more cash, off-loading of expenditures to other
funds, and temporary loans from funds that were established to
assure that certain revenues would go to pre-determined purposes.
This deficit shuffle reduces budget transparency, creates
funding instability for critical State programs and allows the State
to avoid making the difficult decisions needed to effectively align
spending with available revenue, according to a report by the
comptrollers office. Some $6.4 billion in the 2009-10 budget re-
sulted from sweeps of dedicated funds, temporary loans, use of
debt rather than pay-as-you-go capital financing, and other gim-
micks, the report found.42
Numerous other states avoid or reduce the need for such prac-
tices by giving chief executives the responsibility and authority to
maintain fiscal balance by reducing appropriated expenditures in
moderate amounts when necessary. In New York, longstanding
informal agreement between the Legislature and the executive
branch permits use of such impoundment power, only for opera-
tions expenditures by executive agencies. While limited, such au-
thority plays an important role in the governors ability to reduce
fiscal imbalances as the state has seen clearly over the past two
years.
Informal understandings, however, are not a secure legal basis
for such authority. In the past year, public-employee unions and
recipients of state funding have challenged gubernatorial author-
ity to act in two related areas delays in payments to school dis-
tricts, and furloughs for state employees. There is every possibility
that, as the state deals with continuing fiscal challenges, the long-
standing use of executive impoundment power may also come
under judicial challenge. Legislation and/or constitutional
amendment could usefully clarify the status of this existing guber-
natorial power.

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Structural Balance for New York Gubernatorial Powers to Address Budget Gaps During the Fiscal Year

While the Ravitch plan does not spell out details, it would pro-
vide firm legal authority for existing impoundment practices
while extending such powers further. In addition to the lieutenant
governors recommendations, Assembly Speaker Sheldon Silver
has proposed expanding the governors powers to address mid-
year budget gaps. The Assembly Majoritys fiscal reform legisla-
tion, A. 10408 introduced in March 2010, empowers the state
budget director in certain circumstances upon consultation with
the comptroller, the chair of the Senate Finance Committee and
the chair of the Assembly Ways and Means Committee to exer-
cise his or her powers to segregate budgeted appropriations as if a
sufficient pro rata reduction to rectify such imbalance had been
implemented via amendments to all state fiscal year appropria-
tions except appropriations required to pay debt service or appro-
priations for the operation of the legislative and judicial branches
of state government.
As policymakers consider proposals to expand gubernatorial
impoundment authority, key questions include:
n How would broader impoundment actions be triggered?
Options include a determination of imbalance by the
governor alone; by the governor and the Legislature (or
chairs of the legislative fiscal committees); by the governor
with approval of the comptroller; and by an independent
board of experts who would be appointed by the governor,
legislative leaders and comptroller. Currently, the
governor may impound state agency operations
expenditures entirely on his own initiative.
n Would the impoundment power cover aid to school
districts and local governments, as is the case in
Massachusetts, Ohio, Oregon, and some other states?
n Would such authority be limited to a certain percentage of
appropriations? In fiscal 2009-2010, when Governor
Paterson and the Legislature faced sizable midyear budget
gaps that were only partially addressed by legislative
action, impoundment of up to 10 percent of state-funds
appropriations would have allowed the governor to
reduce spending by $7.8 billion; a 5 percent limit would
have permitted impoundment of $3.9 billion. The state
closed out the 2009-10 fiscal year by rolling $2 billion of
unmet liabilities into the following year. Executive
authority to eliminate those liabilities would have required
impoundment of roughly 2.5 percent of state-funds
appropriations.
n Should notice to the Legislature be required before
spending reductions take effect, to allow the opportunity
for legislative-executive action before executive-only
impoundment?
n If the chief executive has only strictly limited authority to
reduce expenditures, how can the state respond if

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 Structural Balance for New York Gubernatorial Powers to Address Budget Gaps During the Fiscal Year

available cash is depleted as the Budget Division and

the Office of the State Comptroller have said could happen
this year?
Ultimately, achieving and maintaining structural budgetary
balance in New York will likely require a new political culture
one that makes a priority of fiscal integrity, rather than support
for increased spending and opposition to new revenues. Clarify-
ing and strengthening executive authority to manage midyear fis-
cal imbalances may help solve looming gaps while promoting
such a change in the political culture.

Endnotes

1 The financial plan, a comprehensive estimate of projected financial resources and spending requirements, is
what most nonspecialists would consider the budget. The budget proposed by the governor and
adopted by the Legislature is actually a series of bills containing appropriations and changes to state laws
governing revenues and use of appropriated funds; the governors Budget Division constructs the financial
plan based on those appropriations, statutory changes, and understanding of legislative intent.
2 Thad Beyle, Governors Institutional Powers 2007, accessed online March 25, 2010, at
http://www.unc.edu/~beyle/gubnewpwr.html.
3 New York State Constitution, Article VII, Section 4.
4 Becker et al. v. Paterson et al.
5 Office of the State Comptroller, Comptrollers Fiscal Update: Closeout Analysis of State Fiscal Year 2009-10, April
2010.
6 See, for example, U.S. Government Accountability Office, State and Local Governments Fiscal Outlook: March
2010 Update, report # GAO-10-358, March 2, 2010.
7 Richard Mattoon and Leslie McGranahan, Revenue Bubbles and Structural Deficits: Whats a State to Do?
Federal Reserve Bank of Chicago Working Paper 2008-15, November 1, 2008.
8 The National Association of State Budget Officers reports annually the revenue projection reflected in each
states adopted budget. Rockefeller Institute staff compared such estimates to actual receipts. Further infor-
mation is available from the author.
9 New York State Division of the Budget, 2008-09 Executive Budget Economic and Revenue Outlook, 210.
10 New York State Division of the Budget, 2009-10 Executive Budget Economic and Revenue Outlook, 199.
11 U.S. General Accounting Office, Balanced Budget Requirements: State Experiences and Implications for the Federal
Government, March 1993.
12 Brayton v. Pawlenty, Minnesota Supreme Court, May 5, 2010, footnote, p. 16.
13 Richard Blumenthal, letter to Honorable Donald L. Williams et al., October 20, 2009.
14 Governor Rell Vetoes Both Democrat Deficit Bills, press release, December 28, 2009.
15 Maryland Code, State Finance and Procurement, Sec. 7-213.
16 Data obtained from Sheila McDonald, Executive Secretary, Maryland Board of Public Works.
17 Massachusetts State Finance Law Chapter 29, Section 9C.
18 Brenda Van Dyck, At Issue: A little-used tool in the toolbox, Minnesota House of Representatives, May 2,
2008.

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 Structural Balance for New York Gubernatorial Powers to Address Budget Gaps During the Fiscal Year

19 Peter S. Wattson, Legislative History of Unallotment Power, State of Minnesota Senate Counsels Office,
June 29, 2009.
20 Brayton v. Pawlenty, Ibid.
21 Betsy Sundquist, House approves unallotment reform bill, http://politicsinminnesota.com/, May 13, 2010.
22 Legislative Service Commission, The Ohio Budget Process, in A Guidebook for Ohio Legislators: Eleventh Edi-
tion 2009-10 (Columbus, OH: Ohio Legislative Service Commission), 89.
23 Strickland Announces $733 Million Budget Reduction Plan to Address Shortfall, press release, January 31,
2008.
24 Harry Esteve, Oregon Republicans call for special session to balance state budget, The Oregonian, May 26, 2010.
25 Claire Heininger and Lisa Fleisher, NJ governor Chris Christie freezes spending to address budget gap,
The Record, Woodland Park, NJ, February 10, 2010.
26 James W. Douglas and Kim U. Hoffman, Impoundment at the State Level: Executive Power and Budget
Impact, American Review of Public Administration 34:3, September 2004, p. 252.
27 Galie also observes: While the courts have accorded great flexibility to the governor in carrying out the du-
ties of the office, they have also held that the governor has only those powers delegated by the constitution
and statutes. See Galie, The New York State Constitution: A Reference Guide, Greenwood Press, New York,
NY, 1991, pp. 101-102.
28 County of Oneida, et al., v. Berle, 49 N.Y.2d 515 (1980). Peter Berle was the state commissioner of environmen-
tal conservation, charged with administering state funding for a sewage treatment program. When the
Carey administration attempted to halt funding that had been approved by the Legislature, county officials
in Oneida and other counties sued to restore the program.
29 Joseph F. Zimmerman, The Government and Politics of New York State, New York University Press, New York,
1981; p. 315.
30 Eric Lane, Legislative Oversight of an Executive Budget Process: Impoundments in New York, Pace Law
Review 5:2, Winter 1985; p. 215.
31 Oneida v. Berle, ibid.
32 New York State Division of the Budget, 2010-11 Executive Budget Five-Year Financial Plan, pp. 13 and 19.
33 Laura L. Anglin, Budget Policy & Reporting Manual B-1183: 7 Percent State Operations Reductions, New
York State Division of the Budget, August 21, 2008; accessed 5/26/2010 at
http://www.budget.state.ny.us/guide/bprm/bulletins/b-1183.html.
34 Danny Hakim, Stalemate in Albany as State Nears Its Last Dollar, The New York Times, November 27, 2009.
35 State of New York Management Resources Project, Governing the Empire State: An Insiders Guide (Albany,
NY: State of New York Management Resource Project, 1988), p. 50.
36 Ibid., p. 52.
37 Ibid.
38 Michael Gormley, Associated Press, Paterson threatens layoffs, Press-Republican, Plattsburgh, NY; May 18,
2010.
39 Richard Ravitch, A Five-Year Plan to Address the New York State Budget Deficit, March 10, 2010, Appen-
dix p. iii.
40 New York State Division of the Budget, The Executive Budget in New York State: A Half-Century Perspective,
footnote, p. 238.
41 Summons With Notice, Becker et al. v. Paterson et al., Albany County Clerk Document Number 10635591 filed
April 22, 2010.
42 Office of the State Comptroller, New Yorks Deficit Shuffle, April 2010.

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Structural Balance for New York Gubernatorial Powers to Address Budget Gaps During the Fiscal Year

About The Nelson A. Rockefeller Institute of Government

The Nelson A. Rockefeller Institute of Government, the public policy research arm of the Univer-
sity at Albany, State University of New York, was established in 1982 to bring the resources of the
64-campus SUNY system to bear on public policy issues. The Institute is active nationally in research
and special projects on the role of state governments in American federalism, and the management
and finances of both state and local governments in major areas of domestic public affairs.
The Rockefeller Institute maintains a particular focus on New York State studies with an ongoing
series of forums on major public-policy issues, publication of the New York State Statistical Yearbook,
special studies, and other initiatives. This report is part of the Institutes research support for Lieu-
tenant Governor Richard Ravitchs project to develop proposals that would lead New York State to
structural budgetary balance.
The report was researched and written by Robert B. Ward, deputy director of the Institute, with
research assistance by Heather Trela, executive assistant to the director of the Institute. The author
gratefully acknowledges comments on an earlier draft by Thomas Gais, acting director of the
Rockefeller Institute; and Donald J. Boyd and David Shaffer, both senior fellows at the Institute. Any
errors are the sole responsibility of the author. Michael Cooper, the Rockefeller Institutes director of
publications, was responsible for layout and design of this report.
Readers may contact the author at wardr@rockinst.org.

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